Business Valuation

What is your business worth? This calculator creates a possible market valuation for your business. Enter your cash flow information for the next four years, your cost of capital and your expected growth rate. We will then determine how much your future cash flow is worth today. The result is the Net Present Value (NPV) of your company.

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Business Valuation Results

The estimated value of your business is NPV_VALUE.

The estimated value of your business is NPV_VALUE. This valuation is based on the present value of all future cash flows generated by your business. To calculate this value, we first calculated your estimated cash flow by year, assuming that your business would exist indefinitely. Each year's estimated cash flow was then discounted by WEIGHTED_AVERAGE_COST_OF_CAPITAL (your weighted average cost of capital) and the number of years until the cash flow would be realized. The sum of all of your future discounted cash flows is the net present value of your business.

Your cash flow was estimated in two parts: from your cash flow statement, and based on a future growth of EXPECTED_ANNUAL_GROWTH. Your business' predicted cash flow for years one through four was taken directly from the values entered for those years. For year 5 and beyond, your cash flow was estimated based on an annual compound growth of EXPECTED_ANNUAL_GROWTH.

What else can I do to increase my valuation?

Increase your operating profits:
You can directly impact your valuation by becoming more profitable. Increased efficiency and lower operating expenses can have a dramatic impact on your business' valuation. Even relatively small increases in profitability can have a dramatic impact on your valuation.
Reduce inventory and accounts receivable:
By reducing your inventory and accounts receivable, you can decrease the amount of capital that is tied up in your business. The net change directly affects your valuation.
Reduce your taxes:
Very much like reducing your inventory, reducing your tax burden can directly impact the value of your business. A business that creates effective tax shields can be worth substantially more than one that doesn't consider this important variable.
Effective capital expenditures:
Target your capital expenditures to projects that increase your growth rate, or increase your profitability. While capital expenditures reduce your near-term cash flow, effective investment in your business can have a positive impact in your valuation.

Your cash flow statement:

Net Cash flow
&NBSP;	Year 1	Year 2	Year 3	Year 4
Net cash flow	NET_CASH_FLOW1	NET_CASH_FLOW2	NET_CASH_FLOW3	NET_CASH_FLOW4

Cash flow from operations

&NBSP; Year 1 Year 2 Year 3 Year 4

Operating profit OPERATING_PROFIT1 OPERATING_PROFIT2 OPERATING_PROFIT3 OPERATING_PROFIT4

Interest expense INTEREST_EXPENSE1 INTEREST_EXPENSE2 INTEREST_EXPENSE3 INTEREST_EXPENSE4

Interest income INTEREST_INCOME1 INTEREST_INCOME2 INTEREST_INCOME3 INTEREST_INCOME4

Income taxes INCOME_TAXES1 INCOME_TAXES2 INCOME_TAXES3 INCOME_TAXES4

Depreciation and amortization DEPRECIATION_AND_AMORTIZATION1 DEPRECIATION_AND_AMORTIZATION2 DEPRECIATION_AND_AMORTIZATION3 DEPRECIATION_AND_AMORTIZATION4

Net from operations CASH_FLOW_FROM_OPERATIONS1 CASH_FLOW_FROM_OPERATIONS2 CASH_FLOW_FROM_OPERATIONS3 CASH_FLOW_FROM_OPERATIONS4

&NBSP;

Cash flow from change in operating assets & liabilities
Change in notes payable CHANGE_IN_NOTES_PAYABLE1 CHANGE_IN_NOTES_PAYABLE2 CHANGE_IN_NOTES_PAYABLE3 CHANGE_IN_NOTES_PAYABLE4

Change in inventory CHANGE_IN_INVENTORY1 CHANGE_IN_INVENTORY2 CHANGE_IN_INVENTORY3 CHANGE_IN_INVENTORY4

Change in accounts receivable CHANGE_IN_ACCOUNTS_RECEIVABLE1 CHANGE_IN_ACCOUNTS_RECEIVABLE2 CHANGE_IN_ACCOUNTS_RECEIVABLE3 CHANGE_IN_ACCOUNTS_RECEIVABLE4

Other net change OTHER_NET_CHANGE1 OTHER_NET_CHANGE2 OTHER_NET_CHANGE3 OTHER_NET_CHANGE4

Net from change in assets & liabilities CHANGES_IN_OPERATING_ASSETS_LIABILITIES1 CHANGES_IN_OPERATING_ASSETS_LIABILITIES2 CHANGES_IN_OPERATING_ASSETS_LIABILITIES3 CHANGES_IN_OPERATING_ASSETS_LIABILITIES4

&NBSP;

Cash flow from investment activities

Capital expenditures CAPITAL_EXPENDITURES1 CAPITAL_EXPENDITURES2 CAPITAL_EXPENDITURES3 CAPITAL_EXPENDITURES4

Additional investment income OTHER_NET_AMOUNT1 OTHER_NET_AMOUNT2 OTHER_NET_AMOUNT3 OTHER_NET_AMOUNT4

Net from investment activities CASH_FLOW_FROM_INVESTMENT_ACTVITIES1 CASH_FLOW_FROM_INVESTMENT_ACTVITIES2 CASH_FLOW_FROM_INVESTMENT_ACTVITIES3 CASH_FLOW_FROM_INVESTMENT_ACTVITIES4

&NBSP;

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Definitions

Expected annual growth: This is the rate you expect your business to grow. This rate is only used on years 5 and above to estimate your future cash flow.
Weighted average cost of capital (WACC): This is the cost of capital, or the interest rate, your investors require to put money into your business. Unless you are a fortune 500 company with an excellent credit rating, this rate should be at least 12% to 25%. For small businesses that rate can be much higher.
NPV Value of your business: This is the value of all of your future cash flows discounted in today's dollars at your Weighted Average Cost of Capital (WACC).
Operating profit: This is your total profit before interest and taxes. This is often called Earnings Before Interest and Taxes or EBIT.
Interest expense: Total interest expense for the year.
Interest income: Total interest income for the year.
Income taxes: Total income taxes paid for the year.
Depreciation and amortization: If you had any depreciation on equipment or land enter those amounts here. They are added back into your cash flow.
Change in notes payable: If you had a net change in your notes payable, enter the change here. If you have an increase in notes payable, your cash flow goes up. If you have had a decrease in your notes payable, your cash flow is reduced.
Change in inventory: If you had a net change in your inventory, enter that amount here. If you are holding more inventory your cash flow is decreased.
Change in accounts receivable: If you had net change in your accounts receivable, enter that amount here. Reducing your accounts receivable by collecting money owed more quickly can increase your cash flow and your valuation.
Changes in operating assets & liabilities: Enter any net change in operating assets and liabilities.
Other net change: Enter any other net change that impacted your cash flow for the period.
Capital expenditures: This is the amount you spent on capital equipment and land that you were not able to expense for the period. If you were able to expense the expenditure it is already accounted for in your EBIT.
Additional investment income: Enter any other investment that increased or (decreased) your cash flow for the period.